Glossary of Microeconomics Terms Exam 1

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Created by ddeetz

study of the allocation of scarce resources among competing ends
our inability to satisfy all our wants
what are the four factors of production?
land - natural resources
labor- people
capital - tools, machines, and buildings firms use to produce goods/services
entrepreneurship - human resources that organizes it all

study of the performance of the choices individuals make, the ways these choices interact in markets, and the influence of governments
the study of the performance of the national economy and the global economy. It focuses on a market for all goods and services, the behavior of the business sector of the whole
highest valued alternative forgone
Opportunity Cost

-boundary between those combination of goods and services that can be produced and those that cannot
-production possibilities frontier (PPF)
activity that a person can perform at a lower opportunity cost than all others
comparative advantage
-higher the price of a good the smaller the quantity demanded is
-inverse relationship between the price of a good and the quantity demanded
law of demand
quantity demanded exceeds the quantity supplied
shortage (excess demand)
-the higher the price of a good, the higher quantity supplied
-direct relationship between the price of a good and the quantity supplied
law of supply
when quantity supplied exceeds the quantity demanded

surplus (excess supply)
price at which the quantity demanded meets the quantity supplied
equilibrium price
difference between price consumer is willing to pay and price actually paid
consumer surplus
difference between price received y producer and the price the producer would have been willing to produce the good at
producer surplus
consumers and producers pursue their own self interest and interact in markets causing the market to be the most efficient
competitive markets
regulation that makes it illegal to charge a price higher than a specified level
price ceiling
when a price ceiling is applied to the housing market
rent ceiling
what does a rent ceiling cause?
-housing shortage
-increased search activity (opp cost)
-black market

regulation that makes it illegal to trade at a price lower than a specified level
price floor
when a price floor is applied to the labor market
minimum wage
minimum wage causes
unemployment aka surplus of labor
when prices effect demand
price elasticity

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